Assume that each of the companys divisions has a required ra

Assume that each of the company\'s divisions has a required rate of return of 7%. Compute residual income for each division. (Enter your answers in millions.) S millions) Beverage Cheese Targeted return Target income Residual Income Beverage Cheese Residual income

Solution

Required 1

Average invested assets =(invested assets beginning + invested assets ending) /2

Beverage = (2701+2613)/2 =2657

Cheese = (4494+4420)/2=4457

Required 2

Required 3

Required 4

Investment center	operating income	/	Average invested assets	=	return on investment
Beverage	369	/	2657	=	13.89%
Cheese	654	/	4457	=	14.67%